Index Wrap, Wednesday, 09/01/2004

Pepper spray stings for about 30-minutes

by Jeff Bailey

A "false alarm" created some intra-day gyrations where economic
reports received far less attention than weekly oil inventory
data that showed a larger draw on supplies than analysts had
expected, while a pepper spray incident near the International
Monetary Fund building in Washington D.C. created some intra-day
volatility for stocks.

Stocks looked poised to erupt in the first hour of trade after
the 10:00 AM EDT release of economic data had July construction
spending and the August ISM Index pretty much inline with
economists' forecast.

Economists' were on target today as even the difficult to
forecast August auto sales (5.2 million) and truck sales (8.2
million) were darned near identical to economists respective
forecast of 5.4 million and 8.2 million.

But just as the major indices approached their DAILY R2s in the
pivot matrix, the 10:30 AM EDT release of weekly oil, gasoline
and distillate inventories helped put a lid on early morning
bullish enthusiasm.

And it was a lid, not a sharp reversal that took place on the oil
data.

It wouldn't surprise me that the young boy who grabbed the girls
"pepper spray necklace" might be named "Jeff." That's something
I as a kid would have done on a field trip back in my youth.

While the names of today's pepper spray incident have been
withheld, I'm going to say it was Charley that was yanking
Frances' chain, where an accidental discharge of pepper spray
near the International Monetary Fund in Washington D.C. created
some jitters and saw stocks make a sharp intra-day move lower,
get snapped back up when news reports became more factual.

While news out of Iraq is sketchy at times, so were the initial
reports out of Washington D.C. Everyone was quick to assume the
worse.

U.S. Market Watch - 09/01/04 Close

The names Charley and Frances are used as Hurrican Charley, which
struck Florida just two weeks ago, and the rapidly approaching
Hurricane Frances may have had some impact on broader financials,
specifically the S&P Insurance Index ($IUX.X) 313.15 -1.05%
today.

Just prior to Hurricane Charley reach Florida the weekend of
August 14 and 15, the S&P Insurance Index ($IUX.X) has been under
some heavy selling pressure to the 300 level, where since that
time, the IUX.X had reclaimed both its trending higher 200-day
SMA (313.58) and still trending lower 50-day SMA (313.89), but
with Hurrican Frances on her way and some industry watchers
saying her wrath could be worse that Charley's, I'd have to think
some bulls were in the profit taking mode among insurers, perhaps
getting ready to reload for another long at lower levels.

Market Snapshot / Internals - 09/01/04 Close

We'll look at some intra-day 30-minute interval charts in a
minute, but if you were out playing golf and looked at some
intra-day charts, you'd think there was a major "bad tick" across
all the indices in today's trade just after 01:00 PM EDT.

Internals were healthy all session. Excluding a brief 30-minute
interval just after 01:00 PM EDT, the TRIN spent the bulk of the
day below 1.0.

Hmmmm.... The number of new highs at the NYSE ended at 176. This
might be ominous as the last time we saw this many new highs was
July 1 (174) and July 7 (180). On July 1, the SPX opened at
roughly 1,140, and the opening tick was the high for the month.
With September being the most bearish month historically, bulls
might be a little careful after the NYSE 10-day NH/NL ratio has
rebounded from 30% (August 16) to 87%. Make no mistake that
there's some bullish leadership among 1, 2 and 3-lettered stocks.

Now, NASDAQ's leadership indications are also much improved, but
still lagging the NYSE. Much improved as in early-to-mid August,
the NASDAQ's 10-day NH/NL ratio did reverse up to 22%, but then
faded back to a recent low reading of 10.2% (August 17), but this
reversal back higher we're still in has the 10-day NH/NL ratio
making a higher high at current best 51.7%.

While just about every piece of fundamental analysis I read has
analysts bracing for a terrible Intel (INTC) mid-quarter update
and a not so healthy nonfarm payroll figure, the internals are
suspiciously strong.

Outside the major market Bullish % indications of course, which
we touch on in each morning's 09:00 intra-day updates.

I wanted to take a quick look at the October Crude Oil futures
(cl04v) contract with the QCharts' WEEKLY Pivots turned on. Get
some "here's where we've been, here's where we are" perspective.

October Crude Oil futures (cl04v) - 30-min. Intervals

Last week, the major indices were stuck in a very tight range of
trade, and I thought the only thing that partially unclogged the
log jam was when the October futures contract broke below
Tuesday's low of $44.75, where that break at about 12:00 PM EDT,
brought a bid into equities, where on Wednesday, stocks rallied
to their close, then began their sideways trade the remainder of
the week.

So far this week, October futures extended losses, but have found
support at this contract's WEEKLY S1, where today's inventory
data finds oil rebounding from $42.00 to $44.00, where it would
appear, and logically so, that the WEEKLY Pivot finds some
selling.

OK. While oil isn't the only game in town, I had previously
stated that we wanted to keep an eye on $44.75 (seemed to draw a
reaction from the equity markets), and I would think if oil moved
much above $44.75 or $45.00, its going to have some psychological
impact on stocks.

Remember that we're looking at 30-minute intervals, so the simple
moving averages we're looking at are NOT the daily moving
averages.

S&P Depository Receipts (AMEX:SPY) - 30-min. Intervals

I'm showing the S&P Depository Receipts (AMEX:SPY) with the
QChart's WEEKLY Pivot levels, which surprisingly enough, match my
levels in the Pivot Matrix this week. While compressed, you can
see that the SPY reaction to the 10:00 AM release of July
construction spending and August ISM Index figures was rather
bullish, with the SPY jerking above its MOTHLY Pivot.

I note that the SPY 200-DAY SMA (from a daily interval bar chart)
would have this key longer-term SMA marking today's high, where
today's high just so happens to be correlative with the 10:30 AM
EDT release of weekly crude oil inventories.

See how the SPY "eased" into its WEEKLY Pivot. It didn't have a
sharp and overly negative reaction to the oil data. A
trader/investor might take on the mindset that this is because
oil hasn't reclaimed a significantly higher price level. Say....
$44.75.

I'd also note some similarity between the Oil futures WEEKLY
Pivot and the SPY weekly pivot.

I also point to today's "pepper spray" incident. I've never been
pepper sprayed, but I hear it burns for about 30-minutes if you
can flush it out with some water.

NASDAQ-100 Tracker (AMEX:QQQ) - 30-min. Intervals

Now, we've seen how the weakness in the SOX.X has been a drag on
the QQQ, and with that drag, the QQQ doesn't appear to have been
as positively impacted by oils decline as perhaps the SPY has.
Hey, the QQQ doesn't have any financials in it either.

The QQQ is also weaker in its WEEKLY Pivot.

When looking at the QQQ's 30-minute chart, one thing that stands
out is the QQQ trade action around its 200-pd SMA. In mid-August
the QQQ rebounded to this 200-pd SMA, which served some
resistance, and not unlike some of the recent breaks of "old
downward trends" on the SPX and INDU daily charts, the break
above this 200-pd SMA has served support twice. Once immediately
after the mid-August break above, and then again yesterday
(Tuesday).

As I try and project this upward trending 200-pd SMA, I can
almost see it coming right up to the QQQ's WEEKLY S1 into
tomorrow's close. After the close, Intel (INTC) $21.43 +0.65%
will give its mid-quarter update.

A 30-minute interval chart of Intel (NASDAQ:INTC) would have its
200-pd SMA higher at $21.72.

Pivot Matrix -

The S&P Banks Index (BIX.X) 359.53 -0.75% and the Semiconductor
Index (SOX.X) 374.16 +0.84% traded places today. Sometimes I get
the feeling that the BIX.X is standing atop a ladder, trying to
hold up a 360-pound center beam of a roof, and is staring at the
floor (the SOX.X) as if to say.... "hey, can I get a little help
here?"

I missed the marking of 3 levels of correlative resistance for
tomorrow in the SOX.X at the 383.60 level as I didn't mark the
MONTHLY Pivot.

The ONLY reason at this point that I could see a rally in the
SOX.X is simply due to a short-covering rally as bear's risk in
the sector remains highs. As of tonight's close, Dorsey/Wright's
Semiconductor Bullish % (BPSEMI) remained in "bear confirmed"
status at 11.04%, meaning that for every 100 semiconductor-
related point and figure charts, just 11 would have a point and
figure buy signal still intact. The recent low reading has been
6% in early August, and we'd have to go back to late September of
2001 to find this sector bullish % at 6%.

You can NOT make a direct tie between bullish % indications and
an index/sector price, but if I were to try, I'd have to think a
move above 385 in the SOX.X might find Dorsey's Semiconductor
Bullish % (BPSEMI) reversing up to the needed 12% to achieve
"bull alert" status. If I really stretched my assessment of
upside risk, then perhaps MONTHLY R1 and current WEEKLY R2 might
find Dorsey's Semiconductor Bullish % (BPSEMI) achieving 34% and
"bull confirmed."